A world-renowned economist said that excise tax rates on tobacco in the Philippines should be re-evaluated to get them closer to the revenue-maximizing rate following years of declining collections and worsening illicit trade. Dr. Arthur Laffer, a former member of President Ronald Reagan’s Economic Policy Advisory Board and founder and chairman of Laffer Associates “The government should take steps to realign tobacco tax rates closer to the revenue-maximizing rate.
Doubling down with further revenue-losing tax rate increases is never a sensible solution to a tax revenue loss,” Dr. Arthur Laffer, a former member of President Ronald Reagan’s Economic Policy Advisory Board and founder and chairman of Laffer Associates, an economic research and consulting firm said. Tobacco excise tax collections have been declining in the past two years – from the highest collection in 2021 of 176 billion to 160 billion in 2022 and 135 billion in 2023.
During the same period, illicit cigarette trade incidence rose from 13.6 percent in 2021 to 15.2 percent in 2022.
In 2023, illicit trade incidence was recorded at 19.6 percent, according to Euromonitor. Laffer noted that affordability issues brought about by the annual excise tax increases have consequently resulted to consumers buying cheap, non-taxed tobacco products.
Laffer said that while the Philippines has, “in general, done a very good job of reforming its system of tobacco taxation from a complicated multi-tiered system to a si.
